LONGUEUIL, QC, June 20, 2014 /CNW Telbec/ - Innergex Renewable Energy
Inc. (TSX: INE) ("Innergex" or the "Corporation") and the Desjardins
Group Pension Plan ("Desjardins") have completed the acquisition from
Hydroméga Group of Companies ("Hydroméga") of the Sainte-Marguerite-1
("SM-1") run-of-river hydroelectric facility located in Quebec,
Canada. The transaction is closed in escrow effective today pending
customary confirmatory release conditions, which are expected to be
satisfied within the next few business days.

"The acquisition of the SM-1 facility provides us with both immediate
contributions to cash flows and a quality hydro asset with a very high
long-term value. Furthermore, we are very pleased to have developed a
transaction structure that allows us to compete in acquiring renewable
energy infrastructure assets at prevailing market prices, while
leveraging the low capital cost and long-term horizon of a pension
fund, as well as our expertise as an operator, to achieve an attractive
after-tax internal rate of return for our shareholders. We intend to
replicate this structure for future acquisitions of renewable energy
assets", states Michel Letellier, President and Chief Executive Officer
of Innergex.

"The Desjardins Group Pension Plan is proud to partner with Innergex for
an investment of this nature, here in Quebec", states Sylvain Gareau,
Vice President responsible for the plan. "We have been associated with
Innergex since its inception and this partnership is important, both
for our organization and for our participants. Our portfolio of
infrastructure assets is nearing the billion dollar mark and is growing
rapidly. Over the last five years, we have become an important actor in
this asset class in Canada", adds Mr. Gareau.

Benefits of the acquisition for the Corporation

Increases annualized Free Cash Flow by approximately $5.0 million

Reduces the Corporation's Payout Ratio by approximately three percentage
points on an annual basis

Adds a high-quality, long-term hydro asset

Provides a new watershed with a regulated water flow

Carries perpetual land and water rights

Introduces a new capital structure that optimizes the return on acquired
assets

Deposit refund reduces the outstanding balance of the revolving term
credit facility

Summary of asset acquired

The 30.5 MW SM-1 hydroelectric facility is located on private land near
the town of Sept-Iles, in Quebec. Its long-term average annual
production is expected to reach 166,500 MWh after completion of a
capital improvement program already underway. The facility was
commissioned in 1993 with one turbine providing an initial capacity of
8.5 MW; two other turbines installed in 2002 provide additional
capacity of 22.0 MW. All of the electricity the facility produces is
covered by two fixed-price 25-year power purchase agreements with
Hydro-Québec: one for 8.5 MW maturing in 2018, which provides for an
annual increase in the selling price of 3% to 6%; and one for 22.0 MW
maturing in 2027, which provides for an annual increase in the selling
price of 2%. Both power purchase agreements contain a renewal option
for an additional 25-year term. The water rights for this facility are
owned in perpetuity. In addition, regulated water flows on the
Sainte-Marguerite River from the operation of Hydro-Québec's 800 MW
Sainte-Marguerite-3 hydroelectric facility upstream results in regular
production levels throughout the year. The SM-1 facility is expected to
generate annualized revenues of approximately $11.0 million and
Adjusted EBITDA of approximately $9.0 million.

Capital improvement program

Hydroméga has undertaken a $5.2 million capital improvement program
comprising the installation of a variable crest weir over the existing
dam, which will increase the expected long-term average annual
production of the facility by 9% or 14,000 MWh, to 166,500 MWh. Work
began in May and is expected to be completed by the end of the year;
any lost revenues expected during construction have been included in
the capital improvement budget, which will be funded equally by the
Corporation and Desjardins.

Partnership with Desjardins

The Corporation and Desjardins respectively own 50.01% and 49.99% of the
common units of Innergex Sainte-Marguerite, S.E.C. (the "Limited
Partnership"). Concurrent with the acquisition of the SM-1 facility,
Desjardins subscribed to a debenture issued by the Limited Partnership
for total proceeds of approximately $40.4 million. This debenture
carries an interest rate of 8.0%, has no predetermined repayment
schedule and matures in 2064.

Terms of the acquisition

The purchase price of the SM-1 facility is approximately $82.1 million,
plus assumption of $30.8 million in non-recourse, project-level debt
carrying a fixed interest rate of 7.4% and maturing in 2025. This debt
will be adjusted to fair market value upon consolidation by the
Corporation. In addition, the final purchase price will be reduced by
the amount of net cash flows generated by the facility since
January 1, 2014, which are attributable to the purchasers.

The purchase price of approximately $82.1 million was paid as follows:
approximately $40.4 million in cash and approximately $41.7 million by
the issuance of preferred units of the Limited Partnership, which the
seller immediately transferred to Innergex in exchange for 4,027,051
newly issued common shares of the Corporation at a price of $10.36 per
common share. The preferred units of the Limited Partnership that the
Corporation now holds carry a preferred distribution rate of 10.5%
until January 1, 2024 and 11.3% thereafter.

Concurrently with the closing of the acquisition, the seller used a
portion of the cash proceeds to repay to the Corporation the
$25.0 million deposit it received in July 2012, plus accrued interest
income of $3.5 million. Innergex will use these proceeds to reduce the
outstanding balance on its revolving term credit facility. The
repayment of this deposit in effect terminates the letter of intent and
exclusivity held by the Corporation with respect to other assets of
Hydroméga.

Also concurrently with the closing of the acquisition, the second-rank
guarantee provided by the SM-1 facility for another of Hydromega's
projects has been lifted.

Cash flow distributions

Until January 1, 2024, all cash flows generated each year by the
facility, after principal payment and interest expense on the existing
project-level debt, will first go towards paying the preferred
distribution to the Corporation; any remaining cash flows will then go
towards paying the interest expense to Desjardins; and then any
remaining cash flow will be distributed between the partners on a
50.01%-49.99% basis. Any unpaid preferred distribution will be accrued
and any unpaid interest expense will be accrued and compounded.

Starting in 2024, cash flows generated each year by the facility, after
principal payment and interest expense on the existing project-level
debt, if any, will be shared between the partners to service the
distribution and the interest on the debenture concurrently. Any
remaining cash flow will then be distributed between the partners on a
50.01%-49.99% basis.

Taking into account the preferred distribution and the operating and
management fees it will receive, all of which will be adjusted annually
for inflation, the Corporation expects this acquisition to contribute
approximately $5.0 million annually to its Free Cash Flow and to reduce
its Payout Ratio by approximately three percentage points.

About the Desjardins Group Pension Plan

The Desjardins Group Pension Plan, acting through its Retirement
Committee, provides a defined benefit pension plan to more than 57,000
beneficiaries. With $8.3 billion in net assets at the end of 2013, the
Desjardins Group Pension Plan ranks 8th among private pension plans in
Canada. As of the end of 2013, the market value of its infrastructure
portfolio was $800.0 million.

About Innergex Renewable Energy Inc.

Innergex Renewable Energy Inc. (TSX: INE) is a leading Canadian
independent renewable power producer. Active since 1990, the Company
develops, owns and operates run-of-river hydroelectric facilities, wind
farms and solar photovoltaic farms and carries out its operations in
Quebec, Ontario and British Columbia and in Idaho, USA. Its portfolio
of assets currently consists of: (i) interests in 33 operating
facilities with an aggregate net installed capacity of 687 MW (gross
1,194 MW), including 26 hydroelectric operating facilities, six wind
farms, and one solar photovoltaic farm; (ii) interests in five projects
under development or under construction with an aggregate net installed
capacity of 210 MW (gross 321 MW), for which power purchase agreements
have been secured; and (iii) prospective projects with an aggregate net
capacity totaling 2,900 MW (gross 3,125 MW). Innergex Renewable Energy
Inc. is rated BBB- by S&P and BB (high) by DBRS (unsolicited rating).

The Corporation's strategy for building shareholder value is to develop
or acquire high-quality facilities that generate sustainable cash flows
and provide a high return on invested capital, and to distribute a
stable dividend.

Non-IFRS Measures

Readers are cautioned that Adjusted EBITDA, Free Cash Flow and Payout
Ratio are not measures recognized by International Financial Reporting
Standards (IFRS) and have no meaning prescribed by it, and therefore
may not be comparable to those presented by other issuers. Innergex
believes that these indicators are important, as they provide
management and the reader with additional information about the
Corporation's production and cash generation capabilities, its ability
to sustain current dividends and dividend increases and its ability to
fund its growth. These indicators also facilitate the comparison of
results over different periods. References to "Adjusted EBITDA" are to
revenues less operating expenses, general and administrative expenses
and prospective project expenses. References to "Free Cash Flow" are to
cash flows from operations before changes in non-cash operating working
capital items, less maintenance capital expenditures net of proceeds
from disposals, scheduled debt principal payments, preferred share
dividends declared and the portion of Free Cash Flow attributed to
non-controlling interests, plus cash receipts by the Harrison Hydro
L.P. for the wheeling services to be provided to other facilities owned
by the Corporation over the course of their power purchase agreement,
plus or minus other elements such as transaction costs related to
realized acquisitions (which are financed at the time of the
acquisition) and realized losses or gains on derivative financial
instruments used to hedge the interest rate on project-level debt.
References to "Payout Ratio" are to dividends declared on common shares
divided by Free Cash Flow. Readers are cautioned that Adjusted EBITDA
should not be construed as an alternative to net earnings and Free Cash
Flow should not be construed as an alternative to cash flows from
operating activities, as determined in accordance with IFRS.

Forward-looking information

In order to inform readers of the Corporation's future prospects, this
press release contains forward-looking information that can generally
be identified by the use of words such as "projected", "potential",
"expect", "will", "should", "estimate", "forecasts", "intends", or
other comparable terminology that states that certain events will or
will not occur. It represents the estimates and expectations of the
Corporation relating to future results and developments as of the date
of this press release. It includes future-oriented financial
information, such as estimated electricity production, revenues and
Adjusted EBITDA, estimated capital improvement program, contribution to
Free Cash Flow and reduction in the Payout Ratio, to inform readers of
the potential financial impact of acquiring the SM-1 hydroelectric
facility. Such information may not be appropriate for other purposes.

The material risks and uncertainties that may cause actual results and
developments to be materially different from current expressed
Forward-Looking Information are referred to in the Corporation's Annual Information Form in the "Risk Factors" section and include, without limitation: the
ability of the Corporation to execute its strategy; its ability to
access sufficient capital resources; liquidity risks related to
derivative financial instruments; changes in hydrology, wind regimes
and solar irradiation; delays and cost overruns in the design and
construction of projects; the ability to develop new facilities;
variability of installation performance and related penalties;
potential undisclosed liabilities associated with the acquisition of
the SM-1 facility; the ability to integrate the acquired facility;
failure to realize the benefits of this acquisition; and failure to
release the transaction from escrow.

Forward-Looking Information in this press release is based on certain
principal assumptions made by the Corporation. The following table
outlines Forward-Looking Information contained in this press release,
the principal assumptions used to derive this information and the
principal risks and uncertainties that could cause actual results to
differ materially from this information.

Principal Assumptions

Principal Risks and Uncertainties

Estimated production, revenues and Adjusted EBITDA
For each facility, the Corporation determines an annual long-term average level of electricity production (LTA) over the expected life of the facility, based on several factors that
include, without limitation, historically observed water flows or wind
or solar irradiation conditions, turbine or panel technology, installed
capacity, energy losses, operational features and maintenance. Although
production will fluctuate from year to year, over an extended period it
should approach the estimated long-term average. The Corporation then
estimates expected annual revenues for each facility by multiplying its LTA by a price for electricity
stipulated in the power purchase agreement secured with a public
utility or other creditworthy counterparty. These agreements stipulate
a base price and, in some cases, a price adjustment depending on the
month, day and hour of delivery. In most cases, power purchase
agreements also contain an annual inflation adjustment based on a
portion of the Consumer Price Index. The Corporation then estimates
annual operating earnings (Adjusted EBITDA of the facility) by subtracting from the estimated revenues the budgeted annual
operating costs, which consist primarily of operators' salaries,
insurance premiums, operations and maintenance expenditures, property
taxes, and royalties; these are predictable and relatively fixed,
varying mainly with inflation except for maintenance expenditures.

Improper assessment of water, wind and sun resources and associated
electricity production
Variability in hydrology, wind regimes and solar irradiation
Equipment failure or unexpected operations & maintenance activity
Unexpected seasonal variability in the production and delivery of
electricity
Variability of facility performance and related penalties
Changes to water and land rental expenses
Unexpected maintenance expenditures
Lower-than-expected inflation

Estimated capital improvement program
The Corporation provides indications of the costs of the capital
improvement program based on the projected costs provided by the
contractor, and provides indications regarding scheduling, progress and
expected benefits of the program based on its extensive experience as a
developer.

Performance of counterparties, such as the contractor
Delays and cost overruns in the execution of the capital improvements
Equipment supply

Projected Free Cash Flow and Payout Ratio
The Corporation estimates Free Cash Flow as projected cash flow from
operations before changes in non-cash operating working capital items,
less estimated maintenance capital expenditures net of proceeds from
disposals, scheduled debt principal payments, preferred share dividends
and the portion of Free Cash Flow attributed to non-controlling
interests, plus cash receipts by the Harrison Hydro L.P. for the
wheeling services to be provided to other facilities owned by the
Corporation over the course of their power purchase agreement. It also
adjusts for other elements, which represent cash inflows or outflows
that are not representative of the Corporation's long-term cash
generating capacity, such as adding back transaction costs related to
realized acquisitions (which are financed at the time of the
acquisition) and adding back realized losses or subtracting realized
gains on derivate financial instruments used to fix the interest rate
on project-level debt.
The Corporation estimates the Payout Ratio by dividing the most recent
declared annual common share dividend by the projected Free Cash Flow.

Adjusted EBITDA below expectations caused mainly by the risks and
uncertainties mentioned above and by higher prospective project
expenses
Projects costs above expectations caused mainly by the performance of
counterparties and delays and cost overruns in the design and
construction of projects
Regulatory and political risk
Interest rate fluctuations and availability of financing
Financial leverage and restrictive covenants governing current and
future indebtedness
Unexpected maintenance capital expenditures
Declaration of dividends at the discretion of the Board

Although the Corporation believes that the expectations and assumptions
on which Forward-Looking Information is based are reasonable, readers
of this press release are cautioned not to rely unduly on this
Forward-Looking Information since no assurance can be given that they
will prove to be correct. The Corporation does not undertake any
obligation to update or revise any Forward-Looking Information, whether
as a result of events or circumstances occurring after the date of this
press release, unless so required by legislation.